Many of the problems associated with cultural diversity in organizations stem from individuals' tendencies to categorize their social environment into “us” and “them.” We present the results of a field study (N = 1111) showing that diversity climate—an organizational climate characterized by openness toward and appreciation of diversity—may be the key to reducing these problems. The results show that diversity climate is positively related to cultural identity for majority members, and to organizational identity for minority members. In organizations with a strong diversity climate, both majority and minority members identify with the organization and their cultural groups simultaneously, thus displaying a dual identity. Diversity climate is positively related to job-related outcomes for both groups, but particularly for minority members.